Project Management Institute

Degrees of trust

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An emphas is on ethics can help your organization optimize performance in a complicated, competitive marketplace—without jeopardizing the bottom line.

 

BY ANN C. LOGUE

every day, your employees have a chance to make a difference, blow a minor incident out of proportion or cover-up potentially damaging, ill-conceived business decisions. Although you can't ensure they make the right choices, your organization can give employees the tools to understand which decisions are most ethical.

“Business has to rely to a large degree on trust,” says Steven A. Lauer, director of the Integrity Research Group at Integrity Interactive,Waltham, Mass., USA, which provides training programs on business ethics. “If you don't believe you can trust what an organization says or what it represents, you have to spend more time doing due diligence.”

Consumers expect something other than the bottom line from companies. People in 20 countries, including Argentina, Australia, Canada, France, Germany and South Africa, ranked a company's responsibilities to society, the environment and its workers as being more important than its economic contribution, according to a 2003 joint report by Arthur D. Little and Business in the Community, an organization of British firms that supports responsible corporate behavior. What's more, a World Economic Forum study of European money managers found that 76 percent of investors and analysts believe that there is a link between non-financial risks, such as the quality of the brand and reputation, and overall shareholder value.

While many people agree that ethical behavior means good business, ethics itself is a tough concept to define because the word evokes a range of interpretations in different cultures. It may mean compliance with local laws, relations with others in the community or moral standards. This lack of consensus on a definition and objectives can cause problems, says Lori Tansy Martens, president of the International Business Ethics Institute in Washington, D.C., USA. “This is particularly acute when you are working internationally,” she says. “If it is done right, [an ethics program] can build a strong culture.”

img If you don't believe you can
trust what an organization
says or what it represents,
you have to spend more
time doing due diligence.
Steven A. Lauer,
Director, Integrity Research Group, Integrity Interactive
Waltham, Mass., USA

EXECUTIVE SUMMARY

Business has to rely on trust, both between employees and management and with clients, partners and vendors.

Management can build trust by embracing ethics programs and infusing the principles throughout the organization.

The company also needs to do careful research to determine what programs to implement and how practices should be supported when dealing with external partners.

There are ways to work with competitors to deal with the problem of government corruption.

That concept, along with the benefits to consumers and shareholders, offers a strong incentive for project managers to develop a code for behavior.

Because there is no single definition, senior executives who demand an organizational code of ethics must start by laying out core values, or those principles that compel you to act. These help to define the organization's goals and how employees are expected to behave as they meet them. “Making ethics part of the culture means including compensation, procurement and promotion,” says Gay Miller, senior partner of HR-Fusion Inc., a human resources consulting firm in Hamilton, Ontario, Canada.

A list of standards is just the start. Everyone in the organization, regardless of function, needs tools to make good decisions—a common ethical mistake is not making a decision at all. Many postpone action or try to push it off to someone else. “Not many times do people do the straightforward unethical thing,” says Bjorn Billhardt, CEO of Enspire Learning in Austin,Texas, USA, an online leadership training program provider. “An ethical decision requires action. It doesn't take a few people behaving unethically. It takes people taking the easy way out.” By developing systems that filter through the ranks, staffers will not only know what the right step is, they'll be better able to take it.

It's perfectly all right if the code is aspirational, says Mr. Lauer, as long as it is consistent with the way the firm operates. For example, in an industry where client entertainment is the norm, it makes no sense to write a code that forbids it. Instead, the code could talk about selling primarily on skills and experience as a way to remind employees that golf outings aren't the best way to keep clients happy. “The most critical thing is that senior members of the organization believe it,” he says.

Walking the Walk

A formal code of ethics must be more than an afterthought. “Most companies have cultures that I call informed acquiescence,” says Dov Seidman, chairman and CEO of LRN, Los Angeles, Calif., USA, which provides online education in law, ethics corporate governance management solutions and compliance. He says that human resources staffers, compliance officers and in-house counsel inform others what the rules are, then use a variety of incentives to get compliance. But because people do not understand or internalize the goals, they see others get away with things, creating cynicism and distrust.

“To the extent that a company implements ethics training or ethics coaching, senior management should be the first to go through it,” Mr. Lauer says. Lower-level employees will be impressed if the CEO sits through the whole class with them, and they'll know that the CEO is just humoring them if he slips out after the opening remarks.

“There has to be a common line of sight to the goal,” Ms. Miller says. “People need to understand what's going on and what's in it for them.” Every project orientation meeting should include a discussion of expected behaviors and shared values, even if everyone on the team belongs to the same organization. Team members must see how the project and its norms fit into broader goals—otherwise, they may see the project as one more task that is outside their job descriptions.

Mr. Seidman says that showing the benefits of ethics code compliance is part of changing the culture. “In a culture of self-governance, following the rules is what you want to do,” he says. “Project management is a cross-functional activity.The more trust, the less conflict, the less tension, the more successful the team will be.”

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Managers must be trained to handle complaints as they come in a timely, fair manner. “There are usually two sides to every story, and frequently three or four,” says James Fisher, director of the Emerson Center for Business Ethics at Saint Louis University, St. Louis, Mo., USA. “If you find yourself covering things up, it's time to take a moment to reconsider. Fear is not a friend to ethical behavior. It can cloud our judgment and prevent us from seeing a broader perspective.”

img Project management is a
cross-functional activity. The
more trust, the less conflict,
the less tension, the more
successful the team will be.
Dov Seidman,
Chairman and CEO, LRN,
Los Angeles, Calif., USA

Project management is a cross-functional activity. The more trust, the less conflict, the less tension, the more successful the team will be.

Enter Reality

Global project managers may have to do things in some markets that would be considered uncouth or illegal in their home cultures. A responsible corporate governance policy will recognize cross-cultural differences and have a system in place to deal with them.

The first step in setting the policy is doing careful research, says Willem Punt, business ethics manager and corporate secretary of the Ethics Institute of South Africa, Pretoria, South Africa. “The quality of an ethical decision is based on the quality of your facts,” he says. With good research on a new market, drawing on local staffers and possibly the help of a consultant or an ethics advisory organization, a business can develop an effective strategy. “If you know that your strategy is expansion into [a questionable market], then you have to determine what your framework will be there.” This includes understanding the culture and standard practices in the new market, setting clear goals for the business, and requiring documentation of activities, including notes on where these may conflict with the company's code of ethics.

Reader Service Number 206

In some places, large facilitation payments are expected. When crafting an ethics policy, it is tempting to forbid them, but that means that business won't get done or employees will make the payments informally, without notifying corporate decision-makers. Mr. Punt is familiar with the issue: “[Facilitation payments are] simply not done in South Africa, but it's often the only way to do business north of our borders,” he says.

He recommends removing the amount of the payment itself from competition. If two or more companies are competing for the same contract from a national government that expects a facilitation payment, the bidders should agree that they will pay the same amount and that their bids will instead compete on price and features. If they are transparent about it, they can put the onus on the payment's recipient and keep their own values intact.

Industry cooperation in the face of government corruption isn't a noble idea; it's actually happening. At the January 2005 World Economic Forum meeting in Davos, Switzerland, leading global mining, resource and construction firms signed an agreement that they would not pay bribes, and that competitors would now face a level, monitored playing field. At press time, 47 companies with more than $300 billion in revenue had signed on. The effort has been led by Alan Boeckmann, chairman and CEO of Fluor; among those signing on are Fluor's competitors in the engineering-construction industry, including Bechtel, ABB Ltd. and Hochtief.

In addition, Mr. Punt suggests that organizations offer employees incentives if they are able to get a specific deal without resorting to facilitation payments. “That person may be able to find a solution,” he says. “Without an incentive, he or she never will.” PM

Ann C. Logue is a Chicago, Ill., USA-based freelance writer who has contributed to Barron's, Compliance Week and HR Magazine.

 

Reader Service Number 223

This material has been reproduced with the permission of the copyright owner. Unauthorized reproduction of this material is strictly prohibited. For permission to reproduce this material, please contact PMI.

PM NETWORK | APRIL 2005 | WWW.PMI.ORG

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